Everyone has heard of the term 'Inflation.' But how many people really know the true definition?
Inflation in reality is a combination of two economic factors.
1. An increase in the price levels of goods and services over a period of time. That means prices of products increase for the same product over time. This is called 'PRICE INFLATION.'
2. It is also an an erosion of the buying power of the currency unit such as the dollar. Inflation is an increase in the supply of money. More and more money is being printed which decrease the buying power of the dollar. This is called 'MONETARY INFLATION.'
Here is how it works. Over time, as the cost of goods and services increase, the value of a dollar is going to fall because a person will not be able to purchase as much with that dollar as he / she previously could.
Think of some of the everyday items we buy. Whether they are necessities such as food and clothing, or discretionary purchases such as tickets to see a movie or attend a sporting event. Have ANY of these prices gone down over the past five years? Have they even stayed the same?
It becomes even more puzzling to the average American because most remember when the last major inflationary trend welcomed us double-digit interest rates. Interest rates went as high as 23% at that time.
So where are the high interest rates this go-around? They are not showing their teeth – yet.
The fact is that all the conditions for inflation seem to be there. They are printing a lot of dollars, prices are going higher and we are buying less for our money. Few seem to notice or care, although gold and silver are acting as though inflation is with us. And, gold and silver are right, inflation is taking off.
Now remember, inflation is an increase in the supply of money. The Federal Reserve is cranking out dollars by the billions which in turn dilute the purchasing power of the dollar. Once again, gold and silver are responding.
Price inflation is the end result and trails monetary inflation. Monetary inflation is now rampant. Gold and silver, being smarter than you and me, are reflecting that by the increase in price and the big rallies we are seeing now. So inflation is here.
What about price inflation? Price inflation has also already started. It does not start on the retail side where we buy our goods and services. It starts on the wholesale level. Look at the increase in commodity prices. How much longer do you think it will be before these higher wholesale costs filter down to the retail level to you and me? For example, Agricultural Raw Materials are up 24%, Coffee is up 45%, Barley is up 32%, Oranges are up 35%, Beef is up 23%, Pork is up 68%, Salmon is up 30%, Sugar is up 24%, Wool is up 30%, Cotton is up 40%, Palm oil is up 26%, Rubber is up 62%, Iron Ore up 103%. These are prices at the wholesale level.
As the price increases continue up the chain of production, is there any chance they will not cause price inflation? Do you think there is any chance at all that producers and retailers will not pass these costs onto consumers?
Let's face facts. These cost increments will filter all the way through the system. Soon your paycheck will not stretch nearly as far. Monetary inflation is here. Price inflation is coming, and so are higher interest rates.
These are the reasons that gold and silver are soaring setting new highs. Silver has experienced extraordinary gains recently. Even our own Government is getting in on the Silver action. They raised the price to wholesale dealers on American Silver Eagles by a whopping 33%.
The great economist Will Rogers said it best, "Invest in inflation, it's the only thing that's going up!"
I'll add one more statement. "Invest in Silver NOW before it gets too high and it will."